HAMISH MCRAE: Give us banks that make money the honourable way

Although it has been a long ten years, if you wanted to choose a week to declare that the great banking crisis is finally over, this one is as good as any.

Of course the dreadful legacy still overhangs the sector.

HSBC, which reported on Monday, still has some huge fines to settle for misconduct. But it is back to making a billion pounds a month, mostly in Asia, and the corner has clearly been turned.

HSBC still has some huge fines to settle for misconduct but it is back to making a billion pounds a month, mostly in Asia

It is not a great time for Royal Bank of Scotland, rightly castigated for its vicious treatment of indebted business customers. But though its behaviour was awful beyond belief, the bank’s results tomorrow may show it is at last close to making a profit on its much-shrunk business.

Barclays remains under a cloud for the circumstances under which it got the injection of capital from Qatar that helped to save it from a UK Government bailout. But the results today will show solid profits.

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Then there is Lloyds. Poor Lloyds, suckered into rescuing HBOS by Gordon Brown, and then finding the mess there so dreadful that it had to be rescued itself.

Well, to judge by the upbeat mood after its results, the past is at last behind it too. Chief executive Antonio Horta-Osorio had a bumpy ride, but has done the job. He has fixed things. Now the bank can go forward and do what banks are supposed to do.

And what, you might ask, is that? Jeremy Corbyn has a vision that banks should serve the country. There was an ideological fervour and indeed unpleasantness to the way he put the argument, but in substance he is right – as Horta-Osorio acknowledges.

Hamish McRae says Lloyds chief executive Antonio Horta-Osorio had a bumpy ride, but he has done the job and fixed things

Unless banks support the real economy the sector will remain under continuous and relentless attack, to the detriment of customers, employees and shareholders.

Serving the country does not mean spraying dud businesses with loans they will never repay. That was Labour’s strategy in the 1960s and 1970s and it ended in tears.

Rather, it is basic financial services, such as providing businesses with working capital, organising home loans (would that the great Halifax, the H of HBOS, were still an independent building society), helping people organise savings, pensions and so on.

If this sounds to many people boring, they are right. It is. But it is vital to the health of the economy. How well they do the basics is how Lloyds and the other retail banks should be judged.

The world economy needs the fancy stuff, the investment banks, the equity markets, the derivatives, the mezzanine finance.

But businesses need simple services at reasonable cost, just as we individuals need help guiding us through a world where more responsibility is loaded onto us. Banks need to make money, but honourably. That is the challenge of their next decade.

Three positive signs

Among the wodge of new information about the economy yesterday, three things stood out. One was the strength of the labour market. The country is still creating jobs at a rate of 350,000 a year, and at last pay is nudging up.

The second was that the strong demand for labour is sucking people into the job market who were previously inactive: young people starting out, older people staying in, and some people who were not previously in jobs at all.

The more people who are in work, the longer the present expansion can continue.

And the third thing was in the public accounts, where thanks in part to the strong job market, Government revenues are holding up pretty well.

Result: the deficit may come down again this year, instead of rising as feared by the Office for Budget Responsibility as recently as last November.

Melrose melting away

The game is starting to look over for Melrose’s hostile bid for GKN, and rightly so. Melrose itself is in trouble, with further losses revealed this week.

GKN is mounting a decent defence. And the Government is assessing whether it should be blocked on security grounds.

The deal, consistently opposed by my colleague Alex Brummer in this column, is dying. Good.